It’s much easier these days to spend money on material things, especially if you can afford to do so. What’s worse is the peer pressure to keep up with the Joneses or their kids. Like many of you, when my wife and I grew up, a family dinner at Ponderosa was a BIG family night out. I fondly remember the all-you-eat buffet and especially loved the chocolate pudding. I grew up in Arlington Heights, Ill., in a middle-class family of four. We did fine financially compared to our neighbors (the houses were all so much smaller back then).

I have succumbed to the peer pressure of keeping up with the Joneses more than I like to admit. If only I still lived in the nice three-bedroom ranch we first bought in Glen Ellyn for $220,000 I would have boatloads more money today! My mortgage would have been paid off years ago. I would already be financially independent had we not moved to a bigger, more expensive home. I probably would have been able to save close to 50% of my income today had we not moved.

IMAGINE BEING ABLE TO SAVE 50% OF YOUR INCOME!

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Spoiling Kids While Living in an Affluent Neighborhood

Just living in an affluent town (DuPage County is in the top 2% for median income in the U.S.) makes it nearly impossible not to spoil my kids. Our kids know what they see and think that’s how everybody lives. Where’s the reality check for them? How well are we preparing our kids to fly on their own and be financially responsible and independent?

I see myself as an example for my three teenage children. Believe me, your kids watch you and soak up like sponges the actions you take with your money.
While I’ve been far from perfect in the frugality war, there are many things I am proud of. For instance:

I seldom give my teenagers money for entertainment or clothes — I usually tell them to use their own money from their summer jobs (they don’t get an allowance).

My kids had their own savings accounts since they were in grade school — I matched their deposits to encourage saving more money.

I keep cash in my pocket for almost all my spending at a register – this is HUGE! When we are at a store and they ask if we can buy … fill in the blank … I usually say, “No, I don’t have enough money,” which creates the concept that money is scarce. If I used plastic, my kids wouldn’t get that message. It’s worked great for me. This summer all three of my kids had multiple jobs, some days all three were out the door before 7 a.m.!

I go out of my way to teach my kids that every retailer is trying to get you to part with your hard-earned money. The best way to do this is to not pay for your kids’ non-necessities. This might include buying them lunch, but not their drinks. They can get water or pay for the drinks themselves. You might think I’m nuts and I am taking this to an extreme, but I’m trying to teach my kids to think before they spend. They usually go for water. I guess the soft drink isn’t that high of a priority after all.

I mow my own lawn. I could afford a service, but showing them I take pride in my property and don’t just pay others to do work I can do for myself is important. I’m the least “handy” guy I know, but I can push a lawn mower.

I only buy used cars and keep them for eight to 15 years. Kids love cool cars, especially boys. I can’t think of a worse financial purchase than a depreciating car that gets poor gas mileage.

One of my favorite gifts to my kids is giving them each Christmas money ($50 apiece now) to use exclusively for Christmas shopping for the immediate family. They absolutely love shopping for each other, and this really ramps up the spirit of giving.

I believe in eating most meals at home and brown bagging lunch. That’s how I grew up. I was a happy kid with two PB&Js for lunch every day at school. Most kids today spend more money on food than I do. I think eating out is a huge waste of money. I enjoy a date night with my wife, the ambiance of the restaurant, the friends and atmosphere, but I’d be broke if I did it as often as most people do. For example, I usually have breakfast at my mother-in-law’s on Saturday mornings, but much to my chagrin, she wasn’t home last Saturday. The alternative was that I took my daughter to a breakfast place on the way home. We had an omelet and blueberry pancakes, and $30 later I was dumbfounded at how much I just spent for what normally costs less than five bucks. Yes, I spent cash and didn’t use a credit or debit card.

One not-so-obvious problem of having kids is spending too much money on less-than-necessary kid-related expenses. Most of us struggle with our discretionary spending. This is the main reason for many people’s financial shortcomings. If you don’t have the lifetime saving account balances you want, look no further than all the money you blew on your kids.

Our kids start sucking money from us with boutique-bought baby clothes. By the time they can walk they have learned how to cry or put their hands out until they get what they want from loving parents. In grade school, candy and ice cream were the most popular requests. These days, an iPhone tops the list for most kids. Now that I am soon to have three kids in college, money for clothes leaped to the top of the list, followed by requests for money for food and gas when they go out with their friends.

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When is it time to say no?

The sooner the better. That’s the lesson I’ve learned the hard way. Most parents I know have spoiled the heck out of their kids by filling their closets with clothes, eating out all the time and paying for travel sports and all the related costs. I, too, have failed many times in some of these areas.

In my family we have finally learned to say “no” for our kids’ sake. In fact, we canceled our Christmas family vacation a couple of years ago as a lesson for our kids. As parents, we want our kids to grow up and be self-sufficient, yet by giving them money for stuff we are often stunting the very growth we are hoping for.

It’s impossible to go back in time and calculate how much money we would characterize “wasted” on dumb purchases, but if we had saved that money instead, I wouldn’t be surprised if it could have paid for almost two years of college at a Big 10 school. Just $5 per day from when they are born until they turn 18 at 8% would grow to more than $70,000.

Has all of our well-intended spoiling set them up for failure in the real world? Do you want your kids to be a hard workers when they grow up? Then stop buying stuff for them and give them ideas how they can earn their own money. Learn to say “no” often.

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I feel like a lot of us are giving our children a false sense of what it may be like for them when they leave the nest. I probably sound like an old fogy, but I think many of our kids will never enjoy as lavish a lifestyle as the one they grew up in. The senior citizens I know did well because they learned to be frugal from their parents due to living through the Great Depression. They tend to be good savers and only buy what they truly need. Compare that with today’s 40- to 55-year-old parent who experienced an amazing economic boom in the 1980s and 1990s. Salaries, bonuses, stock, bond and housing markets all boomed, providing a very wealthy group of parents.

This generation of parents didn’t seem to inherit the frugal gene from their parents, and saying “yes” most of the time to their kids is part of that. They will feel the pain when they have to borrow to pay for their child’s college tuition or do not have nearly enough money saved for retirement.

I’ve been thinking a lot about this lately as my three teenagers hardly ever ask me for money anymore. Oh, they used to ask all the time. I probably trained them to do that by saying “yes” so many times in the past. I helped create these dependent, money-gobbling monsters, and I wasn’t sure if or when it would stop.

No surprise, the money requests stopped a couple of years ago when I finally started saying “no” most of the time. Now they seldom ask for money.

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I can’t remember asking my dad for money when I grew up, not once. Asking him for money to go shopping, or gas money, or for spending money when I was going out with my friends was not something I did. I don’t think it even crossed my mind to ask him. I spent what I earned (or won from my friend’s during our weekly poker game) and that was my only option. Nowadays kids ask for money all the time, for everything.

Spoiling Kids Could Make Them Rotten and You Poor

I think it’s harder than ever to say “no” when you have the resources to say “yes.” Many of us have much more disposable income than our parents did. It would be easier to say no if you simply didn’t have the money, right?

A great way to see how badly a child wants something is to not buy what they ask for and see if they use their own money to buy it. This works for things as simple as items in a vending machine or a $4 glass of orange juice at a restaurant. They don’t say no because they don’t have to.

Should you be surprised if the son or daughter you spoiled rotten comes home from college and isn’t in a hurry to find work because you gave them everything growing up? Maybe they figure they can sleep in their bed, eat your food and borrow your car when they need it. What’s the rush to get a job? Trust me, many teenagers treat their home like it’s a hotel with benefits if their parents let them.

It all gets back to this:

When I have the money, when do I say “no” to my kids because it’s what’s best for everybody?

It’s often easier said then done, but it’s important for your child’s well-being as it is for your net worth.

Brad Rosley, CFP®, has been president of Fortune Financial Group (FFG) since 1996. FFG runs a virtual planning practice working with clients from all over the country. Rosley specializes in helping clients successfully navigate retirement related planning goals and construct investment portfolios to meet their personal life goals. His book "Beyond Money" made the Amazon best-seller list in the summer of 2018.